Securities Litigation

The Financial Institutions Regulatory Authority fined a UBS unit $750,000 for mistakenly reporting customers' municipal-bond-account interest was tax-exempt, when the firm's handling of the trades made it taxable instead. Because the brokerage itself paid over 4000 customers about $1.2 million in interest, the payments weren't tax exempt; to qualify, the interest must be paid directly by a municipal issuer. Instead, the firm had used the customers' long positions in those bonds to cover the firm's short positions and so made substitute interest payments. FINRA's AWC stated ...